In the clash over tax cuts and social programs, much of what progressives need to do is defensive. But it would be a mistake not to float new ideas, too.

By

April 5, 2001

President Bush’s performance is already deeply troubling. So far he looks more like Ronald Reagan than President Bush I. Far-right ideologues are showing up in sub-Cabinet jobs, and little in Bush’s substantive agenda cuts the other way. The Democratic opposition appears unable to gain traction. And a recession seems imminent, a prospect that lends special urgency to the fast-approaching time limits imposed by the 1996 welfare law.

The new Administration has proposed a tax cut that would wipe out the non-Social Security portion of the surplus and take us back to an era of deficits, lining the pockets of the rich and (shades of Reaganomics) making it impossible to find money for important social programs. Bush would do little for those in the lower middle and nothing at all for a large cohort at the bottom. He has put forward a “faith-based” initiative that raises serious constitutional questions and seems intended as the one solution to complex problems that in fact require multifaceted answers.

A tax cut of the right size–one that leaves room for debt retirement and needed spending–should provide relief for people all the way to the bottom of the income ladder. In other words, the tax discussion should include the first antipoverty debate of the new Administration.

It’s true that some good tax policy at the lower end may come without a real debate. Indeed, the occasional success of antipoverty initiatives over the past two decades has been accomplished mainly by stealth, buried in other legislation or at least not highly publicized. Congressman Henry Waxman’s expansions of Medicaid for children in the late eighties, President Clinton’s expansion of the Earned Income Tax Credit (EITC) in 1993 and the work of Senators Orrin Hatch, Ted Kennedy and others on the Child Health Insurance Program (CHIP) in 1997 all largely occurred beneath the radar. And it is entirely possible that down the road, Democrats and a few moderate Republicans on the House Ways and Means and the Senate Finance committees will slip in some modest assistance for the poor and near-poor in a tax bill without much being said about it publicly.

But it would be better, I think, if we were to have a public discussion (although it is possible that given the nasty state of our current politics, a public airing of the issues could create a backlash against even modest steps).

What antipoverty measures should be part of any tax reform bill? There are at least three that are both feasible and urgent, although it will be necessary to calibrate them so they interact properly.

The first is to improve the EITC. It does a lot of good now, adding nearly $4,000 to the $10,000-plus income of a minimum-wage worker with two children. But the EITC is less effective when a family has three or more children and when both parents are present. The EITC falls short of getting families with three children out of poverty if their income is equal to one minimum-wage job, and it isn’t any higher for two-parent families than one-parent households even though the former’s living costs are clearly higher. These problems should be fixed.

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The second is payroll tax relief. More than a quarter of the work force pays no income tax but does incur the payroll tax. These are people–with and without children–who earn up to about $25,000 and are just not making it. Offsetting some or all of their payroll-tax burden (which would not mean reducing the payroll tax) would be a significant step toward fairness.

It is more than strange that we have to think about government supplements to wages in this wealthy country. We should be asking why so many jobs pay so little. Successful labor organizing could close the gap somewhat, as could the increase in the minimum wage that was almost enacted last year. Still, there is no getting around the fact that public treasuries will need to add to wages from work for the foreseeable future if we want people to have incomes that bring them closer to a survival level.

But a tax fairness agenda cannot stop there. We have been conducting a grisly human experiment in most states in the name of welfare reform. Fortunately the economy was extraordinarily healthy and many women found jobs, although not necessarily at wages that got them out of poverty. But the research shows that two out of five former welfare recipients around the country neither have jobs nor currently receive cash assistance. Many are worse off than they were before the new law was enacted. Big numbers are involved: More than a million women and more than 2 million children have been forced off welfare or denied help when they went to the welfare office to ask. When a recession comes, and when the full effects of the time limits in the 1996 law are felt, these numbers are going to get bigger.

Children are at grave risk. One out of six children is poor, but only 7 percent of children receive welfare now, half the number who were getting cash help six years ago. The tax debate creates an opportunity to protect them by making the current $500 per child tax credit, which President Bush wants to raise to $1,000, “refundable,” meaning that the credit would be paid out in cash to families with no federal income tax liability. This would not make up for all of the damage caused by the unfair loss of cash assistance, but it would create a floor of protection. The refundable feature would need to be coordinated with the EITC and payroll-tax relief, but that is something the technical experts can work out.

A tax cut offers a chance to help all the way to the lower end of the income continuum, but it also presents a serious danger to the same group. When the Reagan onslaught was over, his budget director, David Stockman, admitted in a candid book that one of the purposes of the tax cut of 1981 had been to make it structurally impossible to find money for domestic social programs. A tax cut of the magnitude and distributional pattern now being proposed will do the same thing. Déjà vu all over again, as Yogi Berra would say. If there is such a thing as compassionate conservatism, there will be little chance for it to flower if taxes arecut as Bush proposes. This suggests more than a whiff of hypocrisy in the Bush proposals taken as a whole.

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If we can get a tax cut that doesn’t destroy the surplus and even does some good along the way, there is a further modest agenda for those in economic trouble that I think is quite realistic. It has attracted bipartisan support and could be enacted, unless President Bush signals implacable opposition.

One element of such an agenda would be increasing access to health insurance for low-income Americans. The expansion of health coverage for children enacted in 1997 is incomplete because of its failure to cover their parents. The number of uninsured has risen to 42 million. Coverage for children was a good step, although there are still nearly 7 million children eligible for Medicaid or CHIP who are not enrolled. One reason is that coverage is not offered to the entire family. The idea that coverage should be extended to lower-income parents who are not now on Medicaid has been gathering support across party lines for some time.

Second, despite all the additional spending on childcare over the past five years, we have a long way to go. There is a continuing shortage of affordable childcare and a large unmet need for help among lower-income people who have never been on welfare. Childcare funding attracts support from the business community and from both parties. The Republican Congress added $817 million in new funding for childcare last year alone (though Bush plans to cut childcare grants in his budget by $200 million to pay for tax cuts).

Third, we should address the terrible and increasingly visible shortage of affordable rental housing. The escalation of rents is forcing people out of central cities and, along with welfare cuts, causing overflow at homeless shelters across the country. Congress began appropriating funds for new housing vouchers two years ago, and last year, at the initiative of Senator Christopher Bond, a Republican from Missouri, came close to passing a bill that would increase the supply of affordable housing.

Fourth, Congress has been adding money to support local after-school programs, but there is much more to be done, and there is support for doing more. What happens to young people during the hours when they are not in school is important to their development, especially those from lower-income families.

These items, as well as the tax proposals previously mentioned, share an important characteristic. None of them affect only those officially classified as poor. One source of the enmity toward those on welfare was the failure to recognize that those on the next few rungs up the economic ladder faced similar struggles. Too many politicians attracted votes by appealing to working people not with policies that would help them but with promises to make sure that those below them would no longer get something for nothing. A “fairness” agenda that responds to the longstanding needs of the larger group that lacks a living wage for its work would be politically attractive as well as equitable.

I have not yet focused on welfare here, other than to mention some of the negative effects of the 1996 law, because the fairness agenda goes far beyond welfare. Welfare should be what we do for nondisabled people who are hurting when there is an economic or personal downturn, or who are otherwise not in a position to work, including those with caregiving responsibilities for young or chronically ill children or relatives. Welfare is important, but our goals should be ending poverty and pursuing economic justice, which are bigger projects.

The 1996 welfare reform law is coming up for reauthorization in 2002, and a debate is now getting under way. Some of what progressives will need to do is defensive. There will be those who want to cut federal funds and the obligation of the states to keep up most of their previous spending, arguing that the welfare rolls have been cut by more than half and that the money is no longer needed. Thecurrent level of funding makes it possible to provide support not only for people to obtain work but also to help them keep the jobs once they get them. This need does not go away.

It’s unclear how much progressive change the current political atmosphere will allow. But some liberal ideas could gain acceptance, and others should be put on the table even if they won’t succeed:

§ Work should stop the time-limit clock from ticking. In many states people can get a welfare supplement for a low-wage job, but it counts against their time limit. This is absurd and can be easily fixed.

§ The program should be made more recession-proof, with time clocks not operative when unemployment hits a trigger level either nationally or regionally.

§ At least some additional time for education and training should be allowed, delaying work requirements and not counting against time limits. Women on welfare have been pushed out of community college in many places, and forced into menial jobs or workfare assignments.

§ It should be mandatory for states to take domestic violence into account in deciding what women are required to do.

§ Women should not be required to work outside the home until their children are at least 3 years old.

§ States should be rewarded for reducing poverty.

§ Child support payments should go to support the children. Most states currently keep all or almost all of a father’s child support payment, to offset what the state has paid in welfare. This may sound reasonable to some, but it is disastrous in practice.

§ The limits on benefits to legal immigrants enacted during the backlash against immigrants in 1996 should be fully repealed.

§ An especially important area of concern is what has happened to food stamps and Medicaid. Precipitate decreases have occurred in the caseloads of both programs, far beyond what the hot economy could have caused. Misinformation among caseworkers, faultily programmed computers and, in some cases, deliberate failure to inform people of their continuing entitlement to these programs have contributed to the trends. Steps at all levels–legislative and administrative, federal, state and local–are needed to make sure that people are not illegally prevented from getting the benefits they should receive.

§ Most important, many families have lost welfare or now can’t get it but have no work either–the so-called disappeared. Some of the changes suggested above would help them. In addition, the exception that allows 20 percent of the caseload to continue to receive federally funded assistance after five years should be increased. As the time limits loom, it is clear that considerably more than 20 percent of those remaining on the rolls have problems that get in the way of their succeeding in the workplace even though they are not legally disabled. There should also be protections against the arbitrary actions of states with especially punitive policies, requiring them to allow a good-cause exception to any time limit shorter than five years and requiring a face-to-face meeting with a recipient before any sanction or termination of payments is imposed.

Much of the foregoing is technical and complex, and will be hammered out in rooms deep inside the Beltway. It is vital, though, that an outside track be pursued as well. Too many progressives were flummoxed by Bill Clinton, worried about opposing him publicly or confused by his words and myopic about his deeds. Now there is a clear opponent. People who are hurting and people who care should be putting the basic issues of 0economic and racial justice back on the table, issues that are seldom raised in the debates on the Hill. A strong, continuing, organized progressive voice can let politicians know that they will be rewarded for progressive action and punished for the opposite.

A National Campaign for Jobs and Income Support (www.nationalcampaign.org), involving 1,000grassroots community organizations, has been created to present the voice of lower-income people in Washington and to strengthen that voice in state capitals. Public intellectuals need to intensify the voices on the outside track, too. The right has been much more visible in the mainstream media for a long time. Progressives can offer policy ideas that insist on enduring values of equity and justice but encompass decent versions of what we have learned about work, family, community and personal responsibility.

This is a crucial time. The surprising surpluses make it possible to do the right thing, but passage of President Bush’s tax cut proposal may make that impossible. Perhaps it would help if he paid a visit to the Franklin D. Roosevelt Memorial. There he would find, carved in stone for the ages, the words of FDR’s second inaugural address: “The test of our progress is not whether we add more to the abundance of those who have too much. It is whether we provide enough for those who have too little.”

Does compassionate conservatism have a heart? It will if enough people insist on it.